Business and Economy

City Calls For ‘Sensible’ EU Regulation

Tighter EU regulation could “significantly” damage growth in the financial services sector according to new research published by the City of London on Friday.

The study predicts up to 75,000 jobs will be lost across Europe, mostly in major investment banks, as consequence of the credit crunch. Other sectors such as insurance and commodities are expected to be more resilient.

The report, which can be downloaded from the Corporation’s website, identifies five key factors which will determine the performance of the financial services industry over the next five years: the regulatory environment; the state of the world economy; the evolution of domestic savings; competitive pressures from outside the EU; and changing business models.

Stuart Fraser, the City of London’s Chairman of Policy and Resources, said the report “makes clear that the financial services industry faces difficult times ahead. Some of the challenges – like the health of the world economy – are outside the control of EU governments. But Europe can act now to make sure that financial regulation is part of the solution, not part of the problem.”

Fraser called for “sensible, principles-based regulation” to help the EU to maintain its competitive edge adding “There is a lot at stake here. Not only do 1.4 million people work in the sector across the EU, but financial services are a driving economic force, accounting for two-thirds of labour productivity growth in 2000-2007. Worse still, this regulation would drive the whole industry overseas, taking many jobs with it.”

“There is probably a temptation to react by throwing a heavier rule-book at the problem; we must resist that urge because it will not only hamper the industry but confer a false sense of security from future shocks.”

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